SAP Set to Report Q2 Earnings: Here's What You Should Know

Core Viewpoint - SAP SE is expected to report second-quarter 2024 results on July 22, with revenue estimates of $8.86 billion, reflecting an 8.4% year-over-year increase, while earnings per share (EPS) are projected at $1.01, indicating an 11.4% decline from the previous year [1]. Financial Performance - In the first quarter of 2024, SAP reported non-IFRS EPS of €0.81, an 8% increase year-over-year, with total revenues of €8.04 billion, also up 8% year-over-year (9% at constant currency) [2]. - For the second quarter, cloud revenues are estimated at €4.04 billion, representing a 21.7% increase from the same quarter last year [3]. Business Drivers - The strengthening cloud business is anticipated to positively impact SAP's performance, with a 27% increase in the current cloud backlog [3]. - The Rise with SAP solution is a significant driver for cloud business growth, aiding companies in transforming their operations. Notable companies adopting this solution include SKF, Mahle Group, RHI Magnesita, and Roca Group [4]. - The Cloud ERP Suite revenues increased by 31% year-over-year, indicating strong demand for cloud enterprise resource planning solutions [5]. - The recently launched Grow with SAP solution is expected to enhance momentum, particularly among midsize customers [6]. Challenges - SAP's performance is hindered by ongoing softness in the Software license and support segment, with estimated revenues of €2.98 billion for the second quarter, down 6.5% year-over-year [7]. - Rising research and development costs, along with intense competition in the cloud sector, pose additional challenges [8]. Recent Developments - On June 5, 2024, SAP announced plans to acquire WalkMe for $1.5 billion, at $14 per share, a 45% premium over WalkMe's closing price on June 4. This acquisition is expected to close in the third quarter of 2024 and is not anticipated to materially impact SAP's non-IFRS EPS [9][10]. - SAP has revised its dividend policy to pay at least 40% of its non-IFRS profit after tax from continuing operations, compared to the previous policy of 40% of the group's IFRS profit after tax [11][12].